What to do if you have multiple credit cards and rising debt

May 12, 2017
It is easy to end up with more than one credit card in your wallet. Perhaps you want to take advantage of a balance transfer offer or an introductory reward point bonus, so you sign up for a new card even though you do not really need another one. Or maybe you applied for a new card so that you could use it to purchase a package vacation or buy gifts for the holidays when you did not have enough money in your bank account.

Anyone, even someone who has a good grasp of their personal finances, can end up with several credit card accounts with high balances on them.

Why is this a problem?

When you maintain a balance on a credit card from month to month, you are also paying interest on your debt. Over time, this interest can add up. Those $30 jeans, for example, could cost $40 or $50 if you do not pay off the balance after a few months. If you have several cards with balances, then these interest payments can really grow quickly and make your debt much worse even if you no longer use your cards to make purchases.

What can you do?

The first step is to get organized. Second, you need to eliminate high interest debt and, third, you should only spend money that you already have or that you will soon have.

Get organized

When you have multiple cards, it is easy to miss a payment. This could lead to a higher interest rate and late fees, both of which will add to the amount you have to pay to get rid of your credit card debt. Set alerts on your phone or go online to set up automatic minimum payments for each account.

Eliminate high interest debt first

The best debt-reduction strategy is always to pay off the cards with the highest interest rate first. There are two ways to do this. This first involves taking any extra money you have each month and paying it towards the balance of your highest interest card while only paying the minimum amount on cards with low interest rates. Second, if you can quality, get a new card with a lower rate and transfer the balance of your high interest cards to the new account.

Do not spend money you do not have

The final step in getting control of your credit card debt is to adopt financial practices that will keep you from creating more debt in the future. The best way to do this is to only spend money that you already have or will have soon. This mindset will make it possible to pay off the entire card balance at the end of each month so that you can avoid interest charges altogether.

If you have to make a major purchase, consider an online personal loan instead of putting the charges on a card. Online personal loans are designed to help you cover your expenses until your next paycheck arrives. This is a way to borrow money without having to deal with the drawbacks associated with credit card at all. And, since you are using your paycheck as collateral for the loan, you are relying on money that you will have in the near future.